During the presentation, all participants will be in a listen-only mode. Afterwards, you’ll be invited to participate in a question and answer session. At that time if you have a question, please press the 1 followed by the 4 on your telephone.

As a reminder, today’s conference is being recorded, Monday, February 6, 2006.

If at anytime during the conference, you need to reach an operator, please press star-0.

I would now like to turn the conference over to Mr. Joe Cavanaugh, Chief Executive Officer at Star Gas Partners.

Please go ahead, sir.

Before we begin, I’d like to have Rob Rinderman read our Safe Harbor provisions.

Rob?

Thank you, Joe.

Good afternoon, everybody.

This conference call will include forward-looking statements, which represent the partnership’s expectations or beliefs concerning future events that involve risks and uncertainties, including those associated with the approval of the recapitalization, the effect of weather conditions on our financial performance, anticipated proceeds from weather insurance, the price and supply of home heating oil, the consumption patterns of our customers, our ability to obtain satisfactory gross profit margins, our ability to obtain new customers and retain existing customers, our ability to effect strategic acquisitions or redeploy underperforming assets, the ultimate disposition of excess proceeds from the sale of the propane segment should a recapitalization not be consummated, the impact of litigation, the ongoing impact of the business process, redesign project at the home heating oil segment, and our ability to address issues related to that project, natural gas conversions, future union relations and the outcome of current and future union negotiations, the impact of current and future environmental health and safety regulations, customer credit worthiness, and marketing plans.

All statements other than statements of historical facts included in this conference call are forward-looking statements. Although the partnership believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct.

Important factors that could cause actual results to differ materially from the partnership’s expectations cautionary statements are disclosed in this conference call in the partnership’s annual report on Form 10-K for the year ended September 30, 2005, and its quarterly report on Form 10-Q for the fiscal quarter ended December 31, 2005.

All subsequent written and oral forward-looking statements attributable to the partnership or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements.

Unless otherwise required by law, the partnership undertakes no obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise after the date of this conference call.

And I’d like to turn it back to Joe Cavanaugh for the - his opening remarks.

Thanks, Rob.

With me this morning are Dan Donovan, our Chief Operating Officer and President, and Rich Ambury, our Chief Financial Officer.

In many respects, we have had a very successful first quarter. Our heating oil margins increased by 21 cents per gallon over the same period last year, and

Marketing expenses decreased by $3.7 million, reducing the cost to bring in a new account dramatically, and our other operating expenses continue to be tightly controlled.

The operating income comparison with the prior year was also favorably impacted as the first quarter of 2005 results reflected $10.4 million in bridge financing and other financing charges, which were not repeated this year.

As a result of these improvements, our operating income for the three months ended December 31, 2005, increased by $41 million to $20.4 million compared to a loss of $21 million for the quarter ended December 31, 2004.

The increase in heating oil margin is a result of several factors: the higher margins realized in our fixed price business, which is primarily the result of our disciplined pricing approach, margins on our variable price business benefited from a decline in wholesale heating oil prices after they spiked immediately following the hurricanes experienced last summer. This is in contrast to the first quarter of fiscal 2005 when the cost of heating oil increased and we had margin compression.

We were also disciplined in our pricing of new accounts and did not renew accounts that had unrealistically low prices, which also led to higher margins.

In addition, the first fiscal quarter of 2005 margins were unfavorably impacted by about 3.8 cents per gallon due to hedging issues and delay in passing on wholesale cost increases to certain price categories.

I must point out that while we will continue our pricing disciplines and pay close attention to market conditions, we do not expect to see such a favorable margin comparison for the remainder of the fiscal year.

During the quarter, we also announced our board has approved the strategic recapitalization, which, if approved by our unitholders, would result in a reduction of up to $100 million of our outstanding senior notes, the entry of a new general partner, Kestrel Heat, LLC, a subsidiary of Kestrel Energy Partners, LLC, and the receipt of $50 million in new equity and the conversion of about $27 million in senior notes into equity.

We have begun mailing proxies to our unit holders with the unit holder meetings scheduled for March 17.

In addition, we have filed a registration statement with the SEC for our rights offering for common unit holders, which is part of the recapitalization.

We will announce the record date for the rights offering once we’ve completed the SEC review process.

While all of that’s very positive, we still have issues to contend with, most notably net attrition. Heating oil volume was down 11 million gallons during the period or 7.7% primarily due to net customer attrition. Net customer attrition for the quarter was about 1.6% compared to last year’s 0.4%.

And for the 12 months ended December 31, the net customer loss was 8.3% compared to 7.1 (for all of) fiscal 2005. The increase in net attrition is partly due to our previously announced strategic decision to stop adding customer at low margins, but we also continue to feel the negative effects of the centralization of a major portion of our business in 2004.

We continue to believe that localization of customer contact is key to reducing attrition. Our move to more local management is progressing and we are continuing to put more customer contact at the local branch, but this process is taking time.

We are now or will soon be answering a large portion of customer calls during normal business hours locally in Maryland, Rhode Island, New Jersey and in one branch office in New York state, and we expect to be doing so in Pennsylvania within the next two months.

Our employees are very supportive and excited about these changes. There is still much to do before the project is completed.

Telephone equipment has to be re-deployed, offices have to be reconfigured and above all, we have to find and train more people who can do this most important job properly.

This has been a difficult task and we’re moving slowly to avoid disrupting our customers. We expect the entire process could take about two years.

January, which is normally our highest volume month, had temperatures that were approximately 25% warmer than normal, 29% warmer than last January. This has resulted in a 29 million gallon reduction in volume for the month, which will be impossible to make up.

We estimate that the impact on the decline in volume will result in a reduction in operating income of about $14 million as compared to January 2005, that’s before any weather insurance proceeds.

We do have weather insurance covering the November 1, 2005 to February 28, 2006, time period. Based on our estimates of the weather for that period through January and assuming normal weather in February, we could receive approximately $5.5 million from that insurance.

Should February be colder than normal, the amount of insurance proceeds would be reduced.

During this quarter, we received offers for the purchase of two of our heating oil operations located in Holden, Massachusetts, and Boston, Massachusetts.

As these locations were considered to be underperforming, we followed our strategic plan and decided to pursue the offers.

The sale of the Holden business was closed on January 18, 2006. We expect the other sale to close at the end of February subject to the Buyer’s completion of its due diligence review and the negotiation and execution of a contract satisfactory to both parties.

We realized a gain of approximately $1 million on the Holden sale and expect to realize a gain on the Boston sale as well.

This has been a very eventful quarter for the company. I’m very pleased with our performance. I believe that it demonstrates that we have an extremely capable organization, one that can meet the operating challenges that face us everyday.

What we are lacking is a more stable financial base that will allow us to meet external challenges, such as the volatility of fuel oil prices and a heavy debt burden over the longer term.

This would be provided by the proposed recapitalization. Also the recapitalization would eliminate the threat of legal action relating to our use of proceeds from the sale of the propane division, which could have a material adverse effect on the company if such action were decided adversely to it.

In short, I believe, that the proposed recapitalization is crucial to the continued success of Star Gas. Our employees cannot be expected to continue to carry out their jobs successfully unless the organization has a sound capital structure with a potential for growth both internally and through lower customer losses and externally through a well-executed acquisition program.

To accomplish that, we need a general partner who fully understands our business.

I firmly believe that the Kestrel proposal provides what we need to be successful and for that reason, I strongly support the recapitalization proposal.

Thank you and we’re now happy to take your questions.

Duane?

Thank you.

Ladies and gentlemen, if you’d like to register a question, please press 1 followed by 4 on your telephone. You will hear a three-tone prompt to acknowledge your request.

If your question has been answered and you would like to withdraw your registration, simply press the 1 followed by the 3.

One moment, please, for the first question.

Our first question comes from the line of John Wegmann at Speedwell Securities.

Please proceed with your question.

Okay.

During this quarter, where there any weather insurance proceeds?

All right.

Usually you break out the change in volume into three categories: attrition, weather and conservation and so forth, could you break those out for me?

Weather was about 10.8 million gallons, which was the total variance from this year to last year.

We really didn’t…

…see an additional conservation for the quarter ending December ‘05 versus the quarter ending December ‘04.

So, the majority of the variance is basically the attrition.

Unfavorable.

And - so just those two numbers?

line and they also know the impact of trying to get too much margin hurts attrition.

So we do try to work that balance very closely.

Ladies and gentlemen, as a reminder, to register a question, you may press 1-4.

And our next question comes from the line of (Milan Gupta) at (Sellpoint Capital).

Please proceed with your question.

Our next question comes from the line of (Martin Perlman) at (Perlman & Associates).

Please proceed with your question.

Hi.

As you may recall, when the propane division was sold off, it was very large taxable item for unit holders. It wasn’t clear from the proxy material whether the rights offering is the taxable event at all for holders.

Our next question comes from the line of Lenore Sophia at Shane LP.

Please proceed with your question.